PEOPLE WANT TO SELL THEIR HOMES! We went down this road of 0% down 125% financing thanks to Bill Clinton, Chris Dodd and Barney Frank. We had to close the housing gap! There were people out there who could not afford to buy a house! Of course more affluent people used the plan to buy a $730,000 dollar home when they could only afford maybe a modest little $600,000 dollar home.
The point is that three or four years down the road, they still have no equity and are still upside down on the mortgage. They are upside down because they took that extra 25% and paid off credit card debt or other personal debt or maybe added a pool to their new digs that they couldn’t afford in the first place.
Now, in order to sell, they have to find someone willing to take on that extra mortgage amount. Even if we were in the housing market of the last decade, the homes value would not have appreciated enough to make up that 25%. We do not need a plan to re-write these mortgages and “keep people in their homes”. We need a plan to bring liquidity and mobility back in the market. That will only happen if we return to the basic premise that equity builds value. Let’s get the intellectuals and social engineers out of business.
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